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Practice Exercises 2-12 and E2-26 (Ch. 2) E3-39 (ch.3) of Accounting Concepts and Applications

2-12 Using the following information, prepare an income statement.

Cost of goods sold . . . . . . . . . $ 7,300
Interest expense . . . . . . . . . . . 1,200
Wage expense . . . . . . . . . . . . 900
Cash . . . . . . . . . . . . . . . . . . . . 600
Sales . . . . . . . . . . . . . . . . . . . 12,000
Accounts payable . . . . . . . . . . 400
Accounts receivable . . . . . . . . 750
Retained earnings . . . . . . . . . . 3,300
Income tax expense . . . . . . . . . 800

2-26 Income Statement Computations
Following are the operating data for an advertising firm for the year ended December 31,
2009.

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $175,000
Supplies expense . . . . . . . . . . . . . . . . . . . . . . . . 45,000
Salaries expense . . . . . . . . . . . . . . . . . . . . . . . . 70,000
Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
Administrative expense . . . . . . . . . . . . . . . . . . . . 6,000
Income taxes (30% of income before taxes) . . . . ?

For 2009, determine:
1. Income before taxes.
2. Income taxes.
3. Net income.
4. Earnings per share (EPS), assuming there are 15,000 shares of stock outstanding.

E3-29
Journalizing Transactions
Record each of the following transactions in Raintree's general journal. (Omit
explanations.)

1. Issued capital stock for $90,000 cash.
2. Borrowed $45,000 from a bank. Signed a note to secure the debt.
3. Paid salaries and rent of $53,000 and $4,100, respectively.
4. Purchased inventory from a supplier on credit for $6,300.
5. Paid the supplier for the inventory purchased in (4) above.
6. Sold inventory that cost $1,350 for $2,400 on credit.
7. Collected $2,400 from customers on transaction (6) above.

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The solution explains some accounting questions relating to Income statements, EPS, Journalizing Transactions

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